Fox News – Breaking News Updates

latest news and breaking news today

Chapter 24 Test Bank

source : studyres.com

Chapter 24 Test Bank

Chapter 9 Test Bank
Multiple Choice Questions
1. __________ implies that pressure for price increases reaches across _______________markets, not just one.
A. inflation; all
B. deflation; most
C. inflation; most
D. deflation; all
Answer: C Reference:
Explanation:
Type: Multiple Choice
Difficulty: Medium
Category: Understand
2. While one occasionally sees references to inflation over short time periods, the term typically implies
a(n)_____________ in prices.
A. ongoing decrease
B. ongoing rise
C. short term rise
D. short term decrease
Answer: B Reference:
Explanation:
Type: Multiple Choice
Difficulty: Easy
Category: Understand
3. The effects of inflation are seen in:
A. goods and services only
B. wages and income levels only
C. services and wages only
D. goods, services, wages and income levels
Answer: D Reference:
Explanation:
Type: Multiple Choice
Difficulty: Easy
Category: Understand
4. Inflation implies that the level of all prices _____________________.
A. decrease
B. stay the same
C. increase
D. none of the above
Answer: C Reference:
Explanation:
Type: Multiple Choice
Difficulty: Easy
Category: Remember
5. When Anders took out his first two-year membership with Maxima Gym in 2004, the fee was 0.00.
He renewed his membership three times; in 2006 for 0.00, in 2008, for 0.00, and again in 2010, for
0.00. What is the overall rate of inflation for Anders’ gym membership?
A. 8.6%
B. 5.4%
C. 7.87%
D. 16.66%
Answer: D Reference:
Explanation:
Type: Multiple Choice
Difficulty: Hard
Category: Apply
6. Inflation can be calculated in terms of how the overall cost of ___________________ changes over time.
A. all goods
B. the basket of goods
C. all goods and services
D. all services
Answer: B Reference:
Explanation:
Type: Multiple Choice
Difficulty: Easy
Category: Remember
7. If the price index moves from 107 to 110, the rate of inflation is:
A. 3%
B. 30%
C. 28%
D. 2.8%
Answer: D Reference:
Explanation:
Type: Multiple Choice
Difficulty: Hard
Category: Apply
8. The most commonly cited measure of inflation in the United States is:
A. the Consumer Price Index (CPI).
B. the Deflationary Price Index (DPI)
C. the Cumulative Price Index (CPI)
D. the Inflationary Price Index (IPI)
Answer: A Reference:
Explanation:
Type: Multiple Choice
Difficulty: Easy
Category: Understand
9. One of the reasons that a rise in the price of a fixed basket of goods over time tends to overstate the
rise in a consumer’s true cost of living, is:
A. substitution bias
B. attribution bias
C. complimentary bias
D. preference bias
Answer: A Reference:
Explanation:
Type: Multiple Choice
Difficulty: Easy
Category: Understand
10. The percentage change in the price level from one time period to the next, whether the price level is
measured in terms of money or as a price index, will be the _____________.
A. inflation rate
B. price index rate
C. consumer price index
D. producer price Index
Answer: A Reference:
Explanation:
Type: Multiple Choice
Difficulty: Easy
Category: Understand
11. The basket of goods in the Consumer Price Index consists of about _________ products; that is, several
hundred specific products in over __________ broad-item categories.
A. 200; 800
B. 80,000; 400
C. 80,000; 200
D. 800; 200
Answer: C Reference:
Explanation:
Type: Multiple Choice
Difficulty: Medium
Category: Remember
12. Two factors that complicate the calculation of the inflation rate are:
A. substitution and quality/new product bias
B. preferential bias
C. complimentary product bias
D. consumer behavior bias
Answer: A Reference:
Explanation:
Type: Multiple Choice
Difficulty: Easy
Category: Remember
13. When we want to measure wage inflation in the labor market, we use the:
A. Consumer Price Index
B. Product Price Index
C. Employment Cost Index
D. Employment Price Index
Answer: C Reference:
Explanation:
Type: Multiple Choice
Difficulty: Medium
Category: Understand
14. The Producer Price Index is based on prices paid for supplies and inputs by:
A. consumers
B. producers of goods and services
C. government
D. the small business sector
Answer: B Reference:
Explanation:
Type: Multiple Choice
Difficulty: Easy
Category: Remember
15. The ____________________ is based on the prices of merchandise that are exported or imported.
A. International Product Index
B. Producer Price Index
C. Foreign Price Index
D. International Price Index
Answer: A Reference:
Explanation:
Type: Multiple Choice
Difficulty: Medium
Category: Understand
16. Another term used to describe negative inflation is:
A. counter inflation
B. deflation
C. hyperinflation
D. GDP deflator
Answer: B Reference:
Explanation:
Type: Multiple Choice
Difficulty: Easy
Category: Understand
17. In the early 1990’s extremely high inflation rates of 2500% were common in Russia. During that time,
we can say that as a result of those inflation rates, Russia was experiencing ___________________.
A. perpetual inflation
B. ultra inflation
C. hypo inflation
D. hyperinflation
Answer: D Reference:
Explanation:
Type: Multiple Choice
Difficulty: Medium
Category: Analyze
18. Which of the following is an example of one of the major categories in the overall CPI?
A. apparel and accessories
B. entertainment
C. recreation
D. transportation and insurance
Answer: C Reference:
Explanation:
Type: Multiple Choice
Difficulty: Medium
Category: Understand
19. The situation where the buying power of money in terms of goods and services increases is called:
A. deflation.
B. inflation.
C. stationary pricing.
D. hyperinflation.
Answer: A Reference:
Explanation:
Type: Multiple Choice
Difficulty: Easy
Category: Understand
20. Which of the following is the name used to describe the price index that consists of intermediate
goods and finished goods?
A. Producer Price Index
B. Consumer Price Index
C. Employment Cost Index
D. Processing Price Index
Answer: A Reference:
Explanation:
Type: Multiple Choice
Difficulty: Easy
Category: Remember
21. What name is given to the index based on the prices of exported or imported merchandise?
A. U.S. Producer Trade Index
B. International Trade Index
C. International Price Index
D. U.S. Producer Price Index
Answer: C Reference:
Explanation:
Type: Multiple Choice
Difficulty: Easy
Category: Remember
22. An economics professor is discussing a measure of inflation over time based on a basket of goods
comprised of all the components of GDP. Which measure is it?
A. Consumer Price Index
B. GDP Price Index
C. Consumer GDP
D. GDP Deflator
Answer: D Reference:
Explanation:
Type: Multiple Choice
Difficulty: Medium
Category: Analyze
23. The GDP deflator is a price index that includes the following components of GDP:
A. Consumption
B. Consumption plus Investment but not Exports
C. Consumption, Investment plus Exports minus Imports
D. Consumption, Investment, Government plus Exports minus Imports
Answer: D Reference:
Explanation:
Type: Multiple Choice
Difficulty: Medium
Category: Understand
24. With regard to the economy, the term negative inflation is synonymous with which of the following?
A. recession
B. depression
C. deflation
D. hyperinflation
Answer: C Reference:
Explanation:
Type: Multiple Choice
Difficulty: Medium
Category: Understand
25. An analyst needs to adjust the nominal GDP for the years 2000 and 2010 into real terms to conclude
his comparison analysis. The nominal GDP in 2000 was 2 billion and 1,690 billion for 2010; the real
interest rate was 6.79% in 2000 and 3.71% in 2010; the 2000 deflator was 24 and 51 in 2010. What is the
real gain?
A. 18.34%
B. 38.58%
C. 151.48%
D. 70.61%
Answer: A Reference:
Explanation:
Type: Multiple Choice
Difficulty: Hard
Category: Apply
26. Alex wants to measure the nominal 1998 GDP of 3 billion in 2008 dollars. From the data he
gathered, he knows the deflator for 1998 is 30 and for 2008, it is 74, and that real interest in those years
was 6.23% and 3.21% respectively. If he avoids making a misleading calculation, what will the value be?
A. 0 billion
B. 5 billion
C.

{title}

source : {source_domain}

{title}

{content}

,063 billion
D.

{title}

source : {source_domain}

{title}

{content}

,449 billion
Answer: D Reference:
Explanation:
Type: Multiple Choice
Difficulty: Hard
Category: Apply
27. What distinguishes the real value of a statistic from the nominal value of a statistic?
A. timing of announcement
B. adjusting for inflation
C. adjusting for GDP deflator
D. real interest rate
Answer: B Reference:
Explanation:
Type: Multiple Choice
Difficulty: Easy
Category: Understand
28. Nancy’s union has negotiated a three-year wage contract that provides for a 2.4% increase indexed to
inflation. The rates of inflation are forecast to be 1.62%, 1.93% and 2.21% respectively. How will Nancy’s
wage increase be expressed in the new contract?
A. COLA plus 1.6%
B. COLA plus 1.9%
C. COLA plus 2.4%
D. COLA plus 2.2%
Answer: C Reference:
Explanation:
Type: Multiple Choice
Difficulty: Medium
Category: Understand
29. When a price, wage, or interest rate is adjusted automatically with inflation, it is said to be __________.
A. indexed
B. COLAed
C. nominally adjusted
D. semi-indexed
Answer: A Reference:
Explanation:
Type: Multiple Choice
Difficulty: Easy
Category: Analyze
30. In the 1970s and 1980s, labor unions commonly negotiated wage contracts that had
_______________________ which guaranteed that their wages would keep up with inflation.
A. cost of living adjustments
B. inflation protection plans
C. inflation ceiling guarantees
D. wage protection clauses
Answer: A Reference:
Explanation:
Type: Multiple Choice
Difficulty: Easy
Category: Remember
31. The effect of substitution bias is that the rise in the price of a fixed basket of goods over time tends to
___________________ the rise in a consumer’s true cost of living, because it doesn’t take into account that the
person can substitute between goods according to changes in their relative prices.
A. stabilize
B. understate
C. overstate
D. reduce
Answer: C Reference:
Explanation:
Type: Multiple Choice
Difficulty: Easy
Category: Remember
32. The __________________ is the nominal interest rate minus the rate of inflation.
A. real GDP
B. real interest rate
C. nominally adjusted
D. annualized interest rate
Answer: B Reference:
Explanation:
Type: Multiple Choice
Difficulty: Easy
Category: Analyze
33. A payment is said to be ________________ if it is automatically adjusted for inflation.
A. cross referenced
B. indexed
C. matched
D. maintained
Answer: B Reference:
Explanation:
Type: Multiple Choice
Difficulty: Easy
Category: Remember
34. A lender demands an interest rate in part to compensate for any expected ___________, so that the
money that is repaid in the future will have at least as much buying power as the money that was
originally loaned.
A. risk premium
B. inflation
C. compound interest
D. opportunity costs
Answer: B Reference:
Explanation:
Type: Multiple Choice
Difficulty: Medium
Category: Remember
Essay Questions
1. Identify and contrast the differences between the rise in prices due to inflation and the rise in prices in
microeconomic markets.
The first difference is that price changes in the microeconomic supply-and-demand model refer to a price
in a particular market. Inflation implies that pressure for price increases reaches across most markets, not
just one.
The second difference is that price increases in the supply-and-demand model were one-time events,
representing a shift from a previous equilibrium to a new one. Inflation over short time periods may
happen occasionally, but the term typically implies an ongoing rise in prices.
Reference:
Explanation:
Type: Essay
Difficulty: Medium
Category: Understand
2. Describe the formula used to calculate the annual rate of inflation.
Level in new year – level in original year x 100 = percentage change
___________________________________________
(level in original year)
Reference:
Explanation:
Type: Essay
Difficulty: Easy
Category: Understand
3. Explain why statisticians use index numbers to calculate the rate of inflation. Describe the formula for
the calculation.
Statisticians use index numbers as substitutes for dollar amounts to simplify the task of interpreting the
price levels for more realistic and complex baskets of goods.
Total amount spent in base year
= Total amount spent in other year
__________________________________
___________________________________
Index number in base year, always 100
Index number in other year
Reference:
Explanation:
Type: Essay
Difficulty: Hard
Category: Understand
4. Identify the most commonly cited measure of inflation in the United States and explain how it is
calculated. Identify and briefly discuss the subtle problem that statisticians have paid considerable
attention to in recent years.
The most commonly cited measure of inflation in the United States is the Consumer Price Index (CPI). The
CPI is calculated by government statisticians at the U.S. Bureau of Labor Statistics based on the price level
based on a basket of goods and services that represents the purchases of the average consumer.
In recent years, the statisticians at the Bureau of Labor Statistics have paid considerable attention to the
subtle problem that measuring how the total cost of buying a fixed basket of goods has evolved over time
is conceptually not quite the same as measuring a change in the cost of living, which represents how
much it costs for a person to feel that their consumption provides an equal level of satisfaction or utility.
Reference:
Explanation:
Type: Essay
Difficulty: Hard
Category: Understand
5. Identify and briefly describe the problems that always arise from measuring price levels with a fixed
basket of goods and what steps can be taken to counter these problems.
Measuring price levels with a fixed basket of goods will always have two problems, namely substitution
bias and quality/new goods bias.
The substitution bias, arises when using a fixed basket of goods because it does not allow for buying
more of what is relatively less expensive and less of what is relatively more expensive.
The quality/new goods bias arises when using a fixed basket because doing so cannot take into account
improvements in quality and the advent of new goods.
Both of these problems can be reduced in degree—for example, by allowing the basket of goods to
evolve over time—but they cannot be totally eliminated.
Reference:
Explanation:
Type: Essay
Difficulty: Medium
Category: Understand
6. Contrast the influence of inflation with the influence of deflation with respect to the buying power of
money in terms of goods and services.
Inflation is a time when the buying power of money in terms of goods and services is reduced. Deflation is
a time when the buying power of money in terms of goods and services increases.
Reference:
Explanation:
Type: Essay
Difficulty: Easy
Category: Understand
7. Russia experienced inflation of 2500% per year in the early 1990s. Identify the term used to describe
this extreme level of inflation rate and briefly discuss the contributing economic factors that caused this
situation to arise.
Historically, Russia had a controlled economy with very low rates of measured inflation because prices
were forbidden to rise by law. During those times, the Russian population also had perpetual shortages of
goods, because forbidding prices to rise acted like a price ceiling and created a situation where the
quantity of goods demanded often exceeded the quantity supplied. As Russia made a transition toward a
more market-oriented economy in the 1990s, the price ceilings were eliminated and as a consequence the
economy experienced an outburst of extreme inflation, known as hyperinflation before settling in time to
a more reasonable rate of inflation at less than 10%.
Reference:
Explanation:
Type: Essay
Difficulty: Medium
Category: Understand
8. Describe the relationship between inflation levels in prices and inflation levels for prices, wages and
interest rates with respect to their ability to affect people’s economic status and business outcomes.
If all prices, wages, and interest rates adjusted automatically and immediately with inflation, then no one’s
purchasing power or profits or real loan payments would change. However, if other economic variables do
not move exactly in sync with inflation, or if they adjust for inflation only after a time lag, then inflation
can cause three types of problems: unintended redistributions of purchasing power, blurred price signals,
and difficulties in long-term planning.
Reference:
Explanation:
Type: Essay
Difficulty: Hard
Category: Understand
9. In 1996 the U.S. government began offering indexed bonds. Contrast the use of traditional government
bonds with government indexed bonds. Include a brief explanation of the benefits of each form of bond
and identify the party that received that benefit.
Traditionally, government bonds have paid a fixed rate of interest. This policy gave a government that had
borrowed an incentive to encourage inflation, because it could then repay its past borrowing in inflated
dollars at a lower real interest rate.
Indexed government bonds promise to pay a certain real rate of interest above whatever inflation rate
occurs. A retiree trying to plan for the long term and worried about the risk of inflation, will benefit by
purchasing indexed government bonds which guarantee a rate of return higher than inflation no matter
the level of inflation.
Reference:
Explanation:
Type: Essay
Difficulty: Medium
Category: Understand
10. Compare the different measures of inflation known as GDP deflator, the Producer Price Index and
explain how to calculate the real interest rate.
The GDP deflator is based on a basket of goods representing everything in GDP. The Producer Price Index
is based on a basket of goods representing supplies and inputs bought by producers of goods and
services. The real interest rate is calculated by subtracting the rate of inflation from the nominal interest.
Reference:
Explanation:
Type: Essay
Difficulty: Easy
Category: Understand
11. Why does 0 in the future not have the same value as 0 today?
Reference:
Explanation: Even if you knew with complete certainty that the 0 will be repaid in the future, and even
if the rate of inflation is zero, it is still annoying to wait several years for repayment. If you have the money
now, you can spend it on something now if you wish to do so and receive benefits from that spending.
Being forced to wait is an intangible cost, but still a cost. This cost of having to wait is referred to as the
time value of money.
Type: Essay
Difficulty: Hard
Test Bank Statistics Summary
Multiple Choice
Category Stats …
Analyze: 12
Apply: 4
Evaluate: 0
Remember: 12
Understand: 7
Difficulty Stats ….
Easy: 28 Medium: 4
Hard: 3
Total Multiple Choice Questions: 35
True/False
Total True/False Questions: 0
Essay
Category Stats …
Apply: 0
Understand: 10
Difficulty Stats ….
Easy: 3 Medium: 4
Hard: 3
Category: Understand
Total Essay Questions: 10
All Questions
Category Stats …
Analyze: 12
Apply: 4
Evaluate: 0
Remember: 12
Understand: 17
Difficulty Stats ….
Easy: 31 Medium: 8
Hard: 6
Total Questions in Test Bank: 47
This file is copyright 2014, Rice University. All Rights Reserved.

Chapter 24 Test Bank

Chapter 24 Test Bank – A payment is said to be _ if it is automatically adjusted for inflation. If all prices, wages, and interest rates adjusted automatically and immediately with inflation, then no one's purchasing power or profits or real loan payments would change.If you set QuickBooks to automatically apply for payments, your payments will be automatically posted to the oldest open invoice. It is important that you probe and understand exactly what happened in reality before you change anything in QuickBooks.T/T payment in advance is usually used when the sample and small quantity shipments are transported by air. The major advantage of the use of a cash against documents payment is the low cost, versus using a letter of credit.

Resolve common issues when applying a payment towards an invoice – All other pay frequency inputs are assumed to be holidays and vacation days adjusted values. That being said, rates in the real world are driven by many factors, and it is not rare to see contractors take lower compensation. While it is definitely easier said than done, it is certainly possible.In economics, inflation (or less frequently, price inflation) is a general rise in the price level in an economy over a period of time. When the general price level rises…A Payment Is Said To Be If It Is Automatically Adjusted For Inflation. Transcribed Image Text from this Question. 20. A payment is said to be if it is automatically adjusted for inflation.

Resolve common issues when applying a payment towards an invoice

Парни, Переведите Финансовый Термин С Англ На… :: Autolada.ru – The IRS said it is now sending out extra payments as it processes 2020 tax returns, which may indicate some people are owed more money. This can impact your plus-up or adjusted payment if you miscalculated your adjusted gross income because your AGI determines the threshold of your…The price paid for the rental of borrowed funds (usually expressed as a percentage of the rental of $100 per year) is commonly referred to as the. Answer: The bond market supports economic activity by enabling the government and corporations to borrow to undertake their projects and it is the market…Kalahira Kalahira. The payment is said to be indexed. Indexing a payment means that the income payments are adjusted by a price index. This is to maintain the purchasing power of the public when inflation hits.

GOVERNMENT SPENDING REFORMS Reforming our tax system to ...
Small Business Answers - why would the airlines want to ...
Pesquisas relacionadas a academia, academia dicas, tudo ...
GOVERNMENT SPENDING REFORMS Reforming our tax system to ...
Michael Heath-Caldwell M.Arch - 1948 Journal for the Use ...
The Obvious Advantages of Outsourcing Your Telecom Lead ...
GOVERNMENT SPENDING REFORMS Reforming our tax system to ...
pts Question 10 Page 3 of 7 Quiz week 4 Chapter 10 ...
Small Business Answers - why would the airlines want to ...
Measuring The Cost of living
Michael Heath-Caldwell M.Arch - 1948 Journal for the Use ...